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Singapore to take over Australian stock exchange

In a deal worth 8.2 billion dollars, Singapore's stock exchange (SGX) is to take over its Australia's ASX in a merger that will create one of the world's largest and most diversified financial trading hubs.

AFP - The Singapore and Australian stock exchanges on Monday announced a multi-billion dollar merger that will create one of the world's largest and most diversified financial trading hubs.

Singapore's SGX offered 8.2 billion US dollars to take over Sydney-based ASX to form ASX-SGX Ltd in a deal combining Australia's strength in resources with Singapore's more international profile and robust links to the China market.

The merger is expected to be completed in the second quarter of 2011 subject to shareholder and regulatory approval. ASX and SGX will remain separate legal and locally regulated entities after the combination of their operations.

With a market capitalisation of more than 12.3 billion dollars as of Friday, it is set to become the world's fifth largest listed exchange group after Hong Kong, Chicago, Brazil and Germany, bourse officials said in a statement.

Both exchanges will keep their "iconic" brands while offering an expanded platform for global customers to tap listing, trading, clearing and settlement opportunities in Asia, the driver of the world's recovery from its worst recession since the 1930s.

ASX-SGX will also provide access to the largest institutional investor base outside the United States, with total assets under management of 2.3 trillion dollars, including money held by pensions and sovereign wealth funds, the statement said.

"In 2020, in less than 10 years from now, nearly half of the global GDP will be in Asia-Pacific," said Magnus Bocker, the SGX chief executive who will become CEO of the combined group.

"It's an opportunity that we cannot let go," he added in a news conference.

In terms of total listings, the ASX-SGX will overtake Tokyo to become the second largest exchange in the region after Bombay, offering more than 2,700 companies from over 20 countries including 200 from Greater China, the joint statement said.

"There's no doubt that this is a landmark combination. We're trying to act ahead of the curve, be proactive in a world of change quickly," Bocker said.

The Wall Street Journal said the merger could create a roughly 1.9 trillion US dollar market.

ASX shares, put on a trading halt on Friday at 34.96 Australian dollars, soared on the announcement when trading resumed on Monday, surging as much as 25 percent before closing at 41.75 dollars, a gain of 19.4 percent.

The takeover offer valued ASX shares at 48 Australian dollars.

SGX shares closed down 6.18 percent to 8.95 Monday in Singapore.

"SGX is the acquirer, so it is usually the case. The acquirer's shares will go down and the acquiree's shares go up because it's being taken over with a premium," Basil Lui, managing director of independent portal EquitiesTracker.com, told AFP.

After the merger, the group's shares will be listed on both exchanges.

The deal looks likely to face some regulatory questions in Australia as Singapore's government is a major shareholder in SGX, but bourse officials did not expect major obstacles.

"I don't think we would have announced it if we didn't believe that the approvals would be forthcoming," said Robert Elstone, managing director and chief executive of ASX.

Australian Competition and Consumer Commission (ACCC) chairman Graeme Samuel, quoted by public broadcaster ABC, said "I think it's a matter between the Singapore exchange and the Australian exchange and I can't see that raising competition issues for us."

The announcement comes as the ASX is about to lose its long-held monopoly in Australia after the government gave the green light for rival share exchanges.

SGX chairman-elect Chew Choon Seng will likely become the non-executive chairman of the merged entity, while ASX chairman David Gonski is expected to become deputy chairman.

The combined group will have 1,100 employees and an international board with 15 directors from five countries.

"At the end of the day, this combination is not just about cost synergies. It's really about strategically making us a much stronger exchange together, and positioning us to grow into Asia," said Seck Wai Kwong, chief financial officer of SGX.